Cape Town | Wednesday
THE benefits in Wednesday’s Budget were aimed mainly at impoverished South Africans, the elderly and the disabled, but it also contained significant tax relief for middle-income earners.
The government also budgeted for R12-billion from the proceeds of privatisation in 2002/03, according to Finance Minister Trevor Manuel on Wednesday.
He said in his Budget speech in the National Assembly this would result in a net borrowing requirement on R12,2-billion, and ultimately a debt buy-back of R11-billion.
The budget deficit was estimated at R22,7-billion, or 2,1% of gross domestic product, compared to a revised 1,4% deficit in 2001/02.
Briefing the media prior to the speech, National Treasury director-general Maria Ramos said the estimates for privatisation receipts were ”fairly conservative”.
The biggest transaction this year would be the initial public offering (IPO) of telecommunications giant Telkom, after the transactions was postponed last year due to adverse market conditions.
”Its not that we did not want to do it last year… hopefully we will be able to do Telkom this year, so then those figures will be quite conservative,” she said.
The anticipated proceeds from the Telkom IPO had formed the lion’s share of the budgeted receipts of R18-billion that had been expected in 2001/02.
Manuel said the treasury would finance the deficit through the privatisation receipts, R4-billion in short-term loans, and net foreign borrowing of R16,2-billion.
”This will allow domestic long-term debt to be reduced by about R11-billion; in effect, we propose to repay R11-billion in long-term rand-denominated debt next year,” he said.
Pensions and other social grants will increase by R50, to R620, while the child support grant will rise by R20, to R130 a month. Manuel said this was part of government’s drive to target poverty.
War veterans are also to receive a R50 increase, to R638 a month, with disability grants and care dependency grants increasing by R50, to R620 a month, and foster care grants rising by R40, to R450 a month.
Manuel said the social grant system was the government’s most effective tool in alleviating poverty.
Moreover, the date the increases would kick in had been brought forward by three months from July 1 to April 1.
The child support grant is targeted at the poorest of South Africa’s children aged seven years or younger.
Smokers and imbibers of alcoholic beverages again received their customary annual bad news, with prices for tobacco products rising 12%.
But there was good news for those who only consume soft drinks, with prices set to drop by six cents a litre.
Manuel said the increases in prices of alcoholic and tobacco products were being effected for both revenue and health reasons.
The rises, in common parlance often referred to as ”sin taxes” and implemented with immediate effect, are: Beer, ciders and wine: eight percent; Spirits and sparkling wine: 10%; Tobacco products: 12% on average. Manuel also announced that the price of sorghum beer and sorghum flour would not be raised.
On tax relief, Manuel said the government would put R15,2-billion back in taxpayers’ pockets in 2002/03, with the bulk of the relief aimed at lower and middle-income earners.
He said this was made possible by excellent tax collection, and the broadening of the tax base through the introduction of the residence-based system and capital gains tax.
”Individual taxpayers are therefore the primary beneficiaries of the income tax base broadening initiatives and improved collection record.”
The tax proposals provide further relief for individuals and small businesses, lower estate and transfer duties, and a rebate for environmentally-friendly fuels.
The company tax rate of 30%, secondary tax on companies, and VAT, all remain unchanged.
The tax cuts are directed mainly at the lower and middle-income brackets, but all individuals should receive some relief.
The income tax threshold for those under the age of 65 is raised from R23 000 to R27 000, while those older than 65 will not pay tax if they earn less than R42 640 a year.
Rates and brackets are adjusted across the board, with the top marginal rate reduced from 42% to 40%. The salary level at which this kicks in is increased from R215 000 to R240 000.
”Someone earning R60 000 a year will pay R1 380 less; those earning R90 000 will pay R3 480 less,” Manuel said.
Of the total relief, 57% accrues to taxpayers earning less than R150 000 a year, and six percent to those earning more than R300 000.
The interest and dividend income exemption is raised by R2 000 for those under 65, to R6 000 a year, and from R5 000 to R10 000 a year for those 65 or older.
The exemption for foreign interest, however, is limited to encourage taxpayers to save in South Africa.
From March 1, foreign interest and dividends will only be exempt up to R1 000 of the total exemption.
Manuel said property transfer duty rates would be reduced to make home ownership more affordable.
No duty would in future be paid on properties worth less than R100 000, and an amount of five percent on homes valued at between R100 000 and R300 000. The duty on homes worth more than R300 000 would be eight percent. – Sapa